China’s stock market has surged in 2025, driven by breakthroughs in artificial intelligence (AI), with DeepSeek leading the charge. Despite semiconductor restrictions, DeepSeek’s ability to develop an efficient yet powerful AI model that rivals OpenAI is strong evidence that China’s technological capabilities are much closer to those of the U.S. than previously believed.
Adding to the momentum, a recent meeting between President Xi and China’s top tech leaders provided another boost to tech stocks. This meeting signaled clear government support for the private tech sector, dispelling fears of regulatory crackdowns. It suggests that the worst is likely to be over and that the government is now working collaboratively with the industry to build an innovative and technologically advanced economy.
While Chinese tech stocks have dominated headlines, dividend-paying stocks have been the true stalwarts of the market. Over the past several years, China stocks as a whole (measured by MSCI China Index) delivered negative return while dividend stocks (relating to CSI 300 Dividend Index) remained resilient.
| Year | MSCI China Index | CSI 300 Dividend Index |
|---|---|---|
| 2021 | -21.64% | 13.4% |
| 2022 | -21.80% | -5.5% |
| 2023 | -11.04% | 0.9% |
| 2024 | 19.67% | 12.3% |
Past performance is not necessarily indicative of future performance. The CSI Dividend Index was launched on 26 May 2005.
The same can be said when we compare the CSI Dividend Index to the broader China national benchmark, the CSI 300 Index, where the former significantly outperformed during China’s turbulent market conditions over the past four years:
- Consistency of Returns: The CSI Dividend Index posted positive gains in three out of the four years, demonstrating its resilience and ability to withstand market downturns. In contrast, the CSI 300 Index delivered only one positive year, underscoring its greater volatility.
- Total Returns (2021-2025 YTD) as per chart below: The performance gap over this period is striking:
- CSI Dividend Index: +16.30%
Past performance is not necessarily indicative of future performance. The CSI Dividend Index was launched on 26 May 2005.
The CSI Dividend Index’s emphasis on dividend-paying companies appears to have provided a buffer against market fluctuations, resulting in more consistent returns and superior overall performance compared to the broader CSI 300 Index in the past four years. This suggests that for investors seeking exposure to China, focusing on dividend-paying stocks through the CSI Dividend Index may offer a more stable and profitable strategy, particularly in times of market uncertainty.
Why Dividend Investing in China Makes Sense Today
The case for investing in China’s dividend stocks is stronger than ever, supported by four key factors:
1. Record Dividend Payouts: More Cash for Shareholders
The Chinese government has been actively encouraging state-owned enterprises (SOEs) to enhance capital efficiency and distribute more profits to shareholders through dividends. This policy shift has led to a substantial rise in dividend payouts by Chinese companies. In 2024, Chinese firms distributed a record-breaking 2.4 trillion yuan (US$329.7 billion) in dividends, reflecting a growing emphasis on shareholder rewards (Source: China State Council Information Office, 24 Jan 2025.)
Why is the Chinese government doing this? By urging SOEs to increase dividend payments, policymakers are signaling a commitment to fostering a more shareholder-friendly environment. The goal is to attract more investments, stabilize the stock market, and restore investor confidence. For investors, this means higher and more frequent dividend payouts— possibly more cash in the pocket!
2. Falling Interest Rates & Bond Yields Make Dividends More Attractive
As of 28 February 2025, China’s 10-year bond yield has dropped to just 1.77% (Source: Bloomberg, 28 February 2025), making fixed-income investments far less appealing. With the Chinese government cutting interest rates to stimulate the economy, prevent deflation, and meet its 5% GDP growth target, bond yields are expected to remain low.
In this low-yield environment, dividend stocks become a more attractive option for Chinese investors. Currently, finding dividend stocks with yields above 4% isn’t difficult. This shift in investor preference could drive demand for dividend-paying stocks, leading not only to attractive yields but also potential capital appreciation. Early movers may benefit from both high dividend payouts and rising stock prices.
3. Dividend Stocks Are Still Undervalued
The current market rally has not boosted the valuation of Chinese dividend stocks, which remain undervalued. This is evident when comparing the CSI Dividend Index’s P/E ratio to other major indices. As of 28 February 2025, the CSI Dividend Index was trading at a P/E ratio of just 7.3x. This is significantly lower than the CSI 300 Index, which was trading at 15.8x, the Straits Times Index (STI) at 12.6x, and the S&P 500 Index at 25.4x.*
*Past performance is not necessarily indicative of future performance. Securities referenced are not intended as recommendations to buy or sell.
This undervaluation suggests that there is room for capital gains if the CSI Dividend Index’s valuation expands closer to its peers. Meanwhile, investors can continue collecting steady dividend payouts while waiting for potential price appreciation.
4. Attractive and Stable Yields
A key aspect of dividend investing is not just selecting high-yield stocks, but ensuring sustainability in dividend payouts. Consistency is key.
While investors cannot buy the CSI Dividend Index directly, they can gain exposure through an ETF. The China Merchants CSI Dividend Index ETF, which tracks the Index, has delivered an average net dividend yield of 4.6% over the past four years. (Source: China Merchants Fund Management, Bloomberg as of 28 February 2025)
Source: China Merchants Fund Management, Bloomberg as of 28 February 2025
Past performance is not necessarily indicative of future performance.
Moreover, the trend of dividend yields has remained steady, with payouts occurring annually. Fluctuations in yield are largely due to share price movements (as prices rise, yields decrease), but the dividends themselves remain consistent—demonstrating resilience even during market volatility.
For investors looking to navigate China’s evolving market, focusing on dividend-paying stocks offers a potentially stable and profitable strategy in today’s uncertain environment.
Introducing the Lion-China Merchants CSI Dividend Index ETF
Good news for Singapore investors—there is no longer a need to invest in an overseas ETF to gain exposure to the CSI Dividend Index. For the first time, Singapore investors can conveniently access China’s top dividend-paying stocks through the Lion-China Merchants CSI Dividend Index ETF, listed on SGX.
This is the first CSI Dividend Index ETF available outside Mainland China, allowing investors to buy and sell within the familiar SGX ecosystem.
While local investors are familiar with Singapore dividend stocks, China’s dividend landscape is much larger, with thousands of stocks to choose from—many of which may be unfamiliar. A dividend ETF simplifies the selection process, providing exposure to a diversified basket of China’s top dividend-paying companies.
The CSI Dividend Index tracks the top 100 Shanghai-listed or Shenzhen-listed A-share companies ranked by their average cash dividend yield over the past three years. In addition, these companies typically:
✔ Demonstrate a consistent dividend payment history of at least 3 years
✔ Have strong cash flows and high free cash flow to dividend coverage ratios
This ensures that the ETF focuses on financially sound companies with sustainable dividends.
Below are the top 10 index components. While some names may be less familiar to Singapore investors, they represent key industries in China’s economy.
| Top 10 Constituent Stocks of CSI Dividend Index | Weightage |
|---|---|
| Cosco Shipping Holdings | 2.4% |
| Jizhong Energy Resources | 1.9% |
| Heilan Home | 1.8% |
| Ningbo Huaxiang Electronic Co Ltd | 1.4% |
| Chongqing Department Store Co Ltd | 1.4% |
| Shanxi Coal International Energy Group Co., Ltd | 1.4% |
| Shanxi Coking Coal Energy Group Co., Ltd | 1.3% |
| Nanjing Iron & Steel Co Ltd | 1.3% |
| Anhui Hengyuan Coal Industry and Electricity Power | 1.3% |
| Guangdong Provincial Expressway Development Co Ltd | 1.3% |
Securities referenced are not intended as recommendations to buy or sell.
The Lion-China Merchants CSI Dividend Index ETF will be available for subscription from 10 March 2025 to 24 March 2025, with a target listing date of 28 March 2025.
- Issue Price: S$1 per unit
- Minimum Lot Size: 1 unit
- Available Currencies: SGD and CNH
- SGX Code: INC (SGD), ICH (CNH)
The ETF charges a competitive 0.5% annual management fee^ a reasonable cost for conveniently investing in a diversified basket of dividend stocks without requiring the time, effort, or expertise to select individual securities.
^Up to a maximum of 0.99% per annum of the Net Asset Value of the Fund.
Here are the promotional offers:
- OCBC ATM, Mobile Banking and Online Banking Customers: The S$2 application fee is waived if subscribed by 21 March 2025, 12pm.
- Phillip Securities Clients:
- Receive S$12 cash credit for every S$5,000 invested (capped at S$600 cash credit), limited to the first 600 clients.
- Offer valid from 10 March 2025 to 21 March 2025.
- Clients must hold the ETF for at least one month from 28 March 2025
- Tiger Brokers Singapore Clients:
- Receive S$12 cash coupon for every S$5,000 invested (capped at S$600 cash coupon). The Cash Coupon reward is limited to the first SGD 2.5 million in total subscriptions received by Tiger Brokers Singapore or the first 500 customers, whichever comes first.
- Offer valid from 10 March 2025 to 21 March 2025.
- Clients must hold the ETF for at least one month from 28 March 2025
This is a sponsored article by Lion Global Investors. The opinions expressed belong solely to the author.
Disclaimer – Lion-China Merchants CSI Dividend Index ETF
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It is for information only, and is not a recommendation, offer or solicitation for the purchase or sale of any capital markets products or investments and does not have regard to your specific investment objectives, financial situation, tax position or needs. You should read the prospectus and Product Highlights Sheet of the Lion-China Merchants CSI Dividend Index ETF (“ETF”), which is available and may be obtained from Lion Global Investors Limited (“LGI”) or any of the its distributors and appointed Participating Dealers (“PDs”), for further details including the risk factors and consider if the ETF is suitable for you and seek such advice from a financial adviser if necessary, before deciding whether to purchase units in the ETF.
Investments in the ETF are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of the ETF is not guaranteed and, the value of its units and the income accruing to the units, if any, may rise or fall. Past performance, payout yields and payments, as well as, any prediction, projection, or forecast are not necessarily indicative of the future or likely performance, payout yields and payments of the ETF. Any extraordinary performance may be due to exceptional circumstances which may not be sustainable. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI’s discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the ETF. Any references to specific securities are for illustration purposes and are not to be considered as recommendations to buy or sell the securities. It should not be assumed that investment in such specific securities will be profitable. There can be no assurance that any of the allocations or holdings presented will remain in the ETF at the time this information is presented. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information or contained herein and seek professional advice on them. No warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The ETF may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for efficient portfolio management. LGI, its related companies, their directors and/or employees may hold units of the ETF and be engaged in purchasing or selling units of the ETF for themselves or their clients.
The units of the ETF are listed and traded on the Singapore Exchange Securities Trading Limited (“SGX-ST”), and may be traded at prices different from its net asset value, suspended from trading, or delisted. Such listing does not guarantee a liquid market for the units. You cannot purchase or redeem units in the ETF directly with the manager of the ETF, but you may, subject to specific conditions, do so on the SGX-ST or through the PDs.
© Lion Global Investors Limited (UEN/ Registration No. 198601745D). All rights reserved. LGI is a Singapore incorporated company and is not related to any corporation or trading entity that is domiciled in Europe or the United States (other than entities owned by its holding companies).
Disclaimer – China Securities Index Co., Ltd.
All rights in the CSI Dividend Index (“Index”) vest in China Securities Index Co., Ltd. (“CSI”). CSI does not make any warranties, express or implied, regarding the accuracy or completeness of any data related to the Index. CSI is not liable to any person for any error of the Index (whether due to negligence or otherwise), nor shall it be under any obligation to advise any person of any error therein. The Fund based on the Index is in no way sponsored, endorsed, sold or promoted by CSI and CSI shall not have any liability with respect thereto.
Disclaimer – China Merchants Fund Management Company Limited
The references to the company name and logo of China Merchants Fund Management Company Limited in this material do not constitute a guarantee by China Merchants Fund Management Company Limited of the authenticity, accuracy and completeness of the relevant content, nor do they constitute a judgment or guarantee by China Merchants Fund Management Company Limited of the investment value and performance of the Lion-China Merchants CSI Dividend Index ETF. China Merchants Fund Management Company Limited assumes no liability for this material or the investors’ investment in the Lion-China Merchants CSI Dividend Index ETF.
Past performances of China Merchants CSI Dividend ETF and CSI Dividend Index neither are indicative of their future performances, nor constitute a guarantee of investment returns or any investment advice. Investing in funds involves risks, and caution is advised.